Orsted shares meltdown brings new Equinor offshore wind agony
Danish group's stock hits record lows in further US wind-related blow to oil and gas giant that became second-largest investor last year
Orsted’s share price hit record lows after the offshore wind giant announced plans for a DKr60bn ($9.4bn) rights issue, bringing yet more pain for major investor Equinor.
Orsted’s shares stood at DKr211.50 in late afternoon trading in Copenhagen today, almost 32% down on their opening.
The meltdown leaves the Danish group’s shares at their lowest point since the transformation of the former Dong Energy into Orsted in 2017, and compares to a 2021 high point of DKr1,351.
Equinor has since seen the Orsted share price sink, despite telling its own investors that buying into the company was a better way to reap the upsides of offshore wind than developing its own projects.
The fact that Orsted’s latest woes are connected to the US is also another dose of Trump-related offshore wind pain for Equinor, which recently took a near-$1bn impairment hit on its own Empire Wind projects in American waters.
“We will now have a dialogue with Orsted about the capital raising and make a thorough assessment before we make any further comments,” a spokesperson for the oil and gas giant said.
Orsted said earlier the rights issue will reinforce its ability to realise the full value potential of its existing portfolio and capture future value-creating opportunities in offshore wind, and ensure a capital structure that will support Orsted’s investment-grade credit rating.
Analysts flag 'bitter pill' for Orsted
Analysts said the scale of the share price fall reflected the surprise in the market at the scale of the financial bolstering needed by Orsted.
Jacob Pedersen, head of equity research at Sydbank, said in a note: “The capital increase is unexpected, which the share collapse today clearly illustrates. The process surrounding a rights issue traditionally spreads quite a lot of nervousness among investors in the stock market.”
Pedersen said that is “a significant reason” why Sydbank is lowering its recommendation on Orsted’s shares to Hold from Buy. He added: “The capital increase is also necessary. Without it, there is no money to complete the investment programme and maintain Orsted's credit rating.”
Deepa Venkateswaran of Bernstein said: “The significant rights issue announcement today… is a negative development and highlights that previous assumptions from management around the divestment programme, particularly US offshore wind, were over-optimistic.”
However, she added: “Once the bitter pill has been swallowed, the company’s balance-sheet will be in a stronger position to weather further risks on the US offshore portfolio as well as provide a buffer on the execution of the remaining divestment programme.”
Orsted shareholders at a 5 September extraordinary general meeting will be asked to authorise the rights issue, which is a formality given the backing of the Danish State, which holds a majority stake.
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